Business may be dull in the house of Toyota, and it is reflecting in the companys recent financial statements. Despite being a big fish in a very small pond, Indus Motors Company (PSX: INDU) showed a decline in sales and clinched earnings in the first half of the current fiscal due to maintenance and up-grade of the plant that led to slower activity.
In 1HFY17, Hilux sales grew because of the new model Hilux Revo launch, but the company sold 300 less of its flagship variant Corolla compared to the period last year; while Fortuner sales also fell, according to data reported by PAMA. Revenues did not fall and remained about the same levels in 1HFY17 as last year, clocking at Rs51.4 billion supported by the higher priced variants of Corolla sales and the new Hilux.
The subdued revenues were offset by favorable costs and improved margins (17% from 16%). The company managed to cut costs despite higher prices for steel, which is commendable, ultimately cushioning the blow to the bottom line (growing by 3 percent in 1HFY17 year on year) even with higher than expected indirect expenses and finance costs.
For the quarter ending Dec 2016, the company offered an interim dividend of Rs25 per share i.e. 250 percent; in addition to the interim dividend offered in the first quarter for the same amount. Not too shabby!
But while shareholders are kept happy, and INDU is working at optimal capacity with the facility to produce 60,000 units annually, is the company prepared for the massive shake up the industry is soon to see? Corolla has been a fan favorite, keeping its own despite higher than ever sales for Honda in the same category recently, but a lot is expected to change.
Suzuki only a few weeks ago introduced Ciaz to the marketin competition with Toyota Corollabeing imported in CBU form but could very soon see local production as it is garnering a lot of attention. This is a burgeoning market indeed. Soon the likes of European Renault and Audi, not to mention Korean Kia and Hyandai are expected to enter the market while Pakistan Suzuki is gearing up for a massive investment to the tune of $600 million. New plants, new variety, more models, and more choice tie in well for the industrys growth but it also means tougher competition. In fact, the high-end 1300cc and above category of passenger cars will see the most competition and INDU will be in the midst of it. Sadly, the grapevine is silent on INDU. Heres hoping the company has something more exciting up its sleeve in the near future.
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